Cotton City policy will influence the direction of the market

From the point of view of cotton consumption in recent years, the March after the Spring Festival should have been a gradual increase in the procurement of the downstream textile industry, and the price of cotton should be of much help. However, after the Spring Festival this year, cotton spot purchases appeared to be relatively deserted, and cotton ** also experienced a few days of oscillation, showing a continuous downward trend (Since March, Zheng Cotton’s main 1509 contract fell by 700 points). The reason is that the supply of cotton is relatively abundant, and the downstream procurement is not prosperous. The policy direction also influences the direction of the cotton market.
Xinjiang Corps cotton sales pressure is huge

It is understood that Xinjiang Corps' new cotton processing volume in 2014 exceeded 1.6 million tons. People in Xinjiang Corps on the eve of the Spring Festival said that they had to sell more than half of cotton in the first quarter, but as of early March, Xinjiang XPCC cotton prices were higher than the domestic spot cotton prices, sales progress was only a quarter, which made cotton sales of the divisions The pressure has increased dramatically.

Under heavy pressure, the cotton sales strategy of the Xinjiang Corps changed. On March 3, it was rumored that the XPCC reduced the minimum sales price of cotton, and there would be a certain price discount for the purchase of large orders. When the news came out, Zheng Cotton broke down and the price continued to fall. There is no doubt that the Xinjiang BINGTUAN’s sudden price cuts hit the domestic cotton market heavily, and the local cotton prices in Xinjiang will also have a certain degree of decline. As Xinjiang's cotton production accounts for more than two-thirds of the total domestic cotton production, and there is not much left in the mainland cotton, Xinjiang's cotton price directly determines the price trend of the domestic cotton market.

Since the minimum selling price of Xinjiang Corps' machine-picking cotton was 13,500 yuan per ton, a high price support was formed for domestic cotton. The "corporate price" is also a sign of confidence in the market. Once a price reduction sale is announced, it will cause a chain reaction, especially if the consumption is not prosperous in the downstream, it will be more likely that the cotton will be purchased as cheap as possible. Therefore, the focus of domestic cotton prices will shift downwards in a period of time, and the balance may be re-discovered.

After the Spring Festival purchase season is not busy

Since the textile companies had a certain amount of raw material inventory before the Spring Festival, they generally could support a period of time after the Spring Festival. This year's downstream fabric factory is much later than the previous year's start-up. Many fabric factories started after the Lantern Festival, and they are not optimistic about the order situation.

The author visited textile companies in Binzhou, Texas and other places and learned that downstream purchases started slowly after the Spring Festival. Orders were mainly based on small orders, and there was no purchase of large orders. Compared with previous years, it was quite deserted. The lack of downstream orders has also directly affected the enthusiasm of textile companies in purchasing cotton. It is understood that although the cotton traders have more price-raising ideas after the Spring Festival, they have no choice but to face the situation where there is no market for prices. The sale price of cotton in Xinjiang Corps is even worse for the cotton market. Relatively speaking, the spot price of cotton in the Mainland is relatively stable, and the price of cotton in Xinjiang varies from high to low.

Policy adjustment is the focus of the market outlook

In order to improve the domestic cotton market supply and demand pattern and maintain the stable operation of cotton prices, the five ministries and commissions including the Xinjiang Autonomous Region Development and Reform Commission and the Ministry of Finance recently issued the “Notice on Conscientiously Doing a Reducing Work of Planting Area in Xinjiang” (hereinafter referred to as the “Notice”). The "Notice" has somewhat reduced the expectation of the new year's cotton production, and clearly stated that the target direct price for the new year will be lower than last year, guiding cotton farmers to see the situation in the cotton market, reducing cotton cultivation, and changing other crops. . From this perspective, the decline in Xinjiang's cotton planting area in 2015 may be inevitable.

In addition, due to the loss of storage support for cotton in the Mainland this year, the selling price has fallen sharply from last year, and the enthusiasm for planting cotton farmers has dropped significantly. It is expected that the cotton planting area in the Mainland will decline by more than one-third. The support of the direct subsidies policy will directly affect the planting intentions of cotton farmers and the output of new cotton. At present, the market generally believes that there are more than 10 million tons of cotton in the State Reserve, and this kind of storage may be the amount of domestic cotton consumption more than one and a half years, so whether the country is making a reserve after March is also the focus of the market.

The author believes that the sale of reserve cotton needs to meet the situation that domestic cotton is in short supply. Therefore, whether or not to sell should be based on the progress of domestic cotton consumption. Insufficient demand will inevitably cause the price of cotton to rise. If the current pattern of weakness is maintained, reserve cotton should be quietly waiting. However, if there is an accident, it is another matter.

In summary, current cotton purchases are not active, and the downstream consumer warming remains to be seen. As the oversupply situation still exists, cotton prices do not have room to increase significantly. In the same way, due to the cost support and continuous consumption of domestic cotton, under the circumstances that Xinjiang Bingtuan cotton prices do not continue to decline, and Mainland cotton prices do not drop sharply, Zheng cotton prices generally maintain a fluctuating trend, and the subsequent attention to the policy's expected impact on the cotton market and phased supply and demand The change.